Identify the differences between all four market structures in the short-run and long-run.

Explain the significance that the average total cost (ATC) curve has on profit and loss based on each type of market structure. Explore how the ATC curve affects all four market structures and identify whether firms will earn a profit or loss based on the placement of the ATC curve and price.

 

Answer:

The four major forms of market structures are :

• Perfect competition
• monopoly
• monopolistic
• oligopoly

In short run Perfect competition firms try cover up its average variable costs only, to continue in business. While monpolistc may earn profit or incur loss. But rest of the two generally manages to earn profit.

In long run the prefect competition firms are able to cover its ATC. And rest of the three generally enjoys the profit.

ATC and price are very significant as:

• if Price is above ATC, the firm enjoys the profit
• if price s below ATC, its a loss

PFA